BEIJING, April 28 (Reuters) - Blind Chinese activist ChenGuangcheng is under U.S. protection in Beijing after anaudacious escape from 19 months under house arrest, a U.S.-basedgroup said on Saturday, in a drama that threatens to ignite newtensions between the two governments.

The United States has not confirmed publicly reports thatChen, who slipped away from under the noses of guards and eyesand ears of surveillance equipment around his village home inShandong province, fled into the U.S. embassy.

China has also declined direct public comment on Chen'sreported escape, which threatens to overshadow a two-day meetingwith top Obama administration officials, including Secretary ofState Hillary Clinton, in Beijing from Thursday.

But Texas-based ChinaAid said it "learned from a sourceclose to the Chen Guangcheng situation that Chen is under U.S.protection and high level talks are currently under way betweenU.S. and Chinese officials regarding Chen's status."

"Because of Chen's wide popularity, the Obama Administrationmust stand firmly with him or risk losing credibility as adefender of freedom and the rule of law," Bob Fu, president ofthe religious and political rights advocacy group that has longcampaigned for Chen's freedom, said in an email.

The reports of Chen's escape come nearly three months aftera Chinese official Wang Lijun fled into a U.S. consulate forover 24 hours on Feb. 6, unleashing a scandal that has rattledthe ruling Communist Party a few months before they head into aonce-in-a-decade leadership handover.

Wang's brief flight to the U.S. consulate led to thedownfall of top official Bo Xilai who had been openlycampaigning for a place in the inner circle of power in Beijing.

Pu Zhiqiang, a Beijing lawyer and rights advocate, saidreliable contacts also told him Chen took refuge in U.S. embassygrounds. The incident will be another damaging blot on China'ssecurity services, following Wang's flight, said Pu.

"Everyone knew about the suffering of Chen Guangcheng andhis family but nobody dared raised his head over this andignored it," he told Reuters, referring to Chinese officials.

"Chen Guangcheng has been the most typical victim of thislawless, boundless exercise of power," said Pu. "But the day hasfinally come when he has escaped from it."

Chen, a self-schooled legal advocate who campaigned againstabortions forced under China's "one child" policy, had been heldunder extra-legal confinement in his village home in Linyi ineastern Shandong province since September 2010 when he wasreleased from jail.

His confinement with his family under relentlesssurveillance fanned protests by Chinese sympathisers andcriticism from foreign governments and groups.

Chen's escape and the furor it has unleashed could add tothe headaches of China's ruling Communist Party, which isstriving to ensure stability and authority before a leadershiptransition later this year.

It also threatens to overshadow a visit by Clinton andTreasury Secretary Timothy Geithner, who are due in Beijing nextweek for the annual "strategic and economic dialogue" betweenthe two countries.

"Our holding this briefing today shows that the StrategicEconomic Dialogue will take place as scheduled," Cui told a newsconference about the China-U.S. dialogue. He said he had "noinformation" on Chen.

ChinaAid's Fu told Reuters by telephone from Texas thatChen's flight was not timed to take advantage of the high-leveldiplomacy.

"There's really no calculation. He was totally cut off fromthe outside world and has been preparing for this moment formonths," he said.

U.S. economic analysts who follow China voiced conflictingviews on the potential of Chen's standoff to disrupt bilateralties - and by extension the world economy.

Bonnie Baha, portfolio manager at the $32 billion DoubleLineCapital, said "the timing couldn't be worse" with the Clintontrip and with Beijing "already embarrassed over the Bo Xilaiscandal."

"Given the state of the world's economy and the level ofeconomic interdependence which currently exists this certainlyhas the potential to roil world markets," she said.

But David Hale, an economist based in Chicago and veteranChina watcher, said he saw "nothing new in this and (it) willcontinue so long as China remains an authoritarian country."

"I do not think this will have a major impact on themarkets. The Obama administration will try to manage this in alow-key way," he said.

Hu Jia, a Beijing dissident who met Chen several days ago inBeijing, recounted that Chen said he would not seek asylum fromwithin the U.S. embassy.